N-30D 1 dn30d.htm PACIFIC CORINTHIAN ANNUAL REPORT DTD 12/31/2001 Prepared by R.R. Donnelley Financial -- Pacific Corinthian Annual Report dtd 12/31/2001
December 31, 2001
     
•  Pacific Corinthian Variable
Separate Account of
Pacific Life Insurance Company
 
 
 
Annual
    Report
 
PACIFIC CORINTHIAN

TABLE OF CONTENTS
 
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
 

PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
DECEMBER 31, 2001
(In thousands)
 
   
Variable
Account
I
   
Variable
Account
II
   
Variable
Account
IV
   
Variable
Account
VII
   
Variable
Account
IX
   
Variable
Account
X
     
Variable
Account
XI
   
Variable
Account
XII
     
Variable
Account
XIII
   
Variable
Account
XIV
   
ASSETS
                                                     
Investments:
                                                     
Money Market Portfolio
  
$2,188
                                                 
Equity Portfolio
       
$28,296
                                            
Inflation Managed Portfolio (1)
            
$1,106
                                       
Equity Income Portfolio
                 
$7,040
                                  
Multi-Strategy Portfolio
                      
$5,266
                             
Managed Bond Portfolio
                           
$9,440
                        
High Yield Bond Portfolio
                                  
$115
                 
Equity Index Portfolio
                                       
$2,327
            
International Value Portfolio
                                              
$534
     
Growth LT Portfolio
                                                   
$4,827
Receivables:
                                                     
Due from Pacific Life Insurance Company
                                       
11
          
7
Fund shares redeemed
  
3
   
60
   
1
   
5
   
5
   
18
                 
1
     
   
Total Assets
  
2,191
   
28,356
   
1,107
   
7,045
   
5,271
   
9,458
     
115
   
2,338
     
535
   
4,834
   
LIABILITIES
                                                     
Payables:
                                                     
Due to Pacific Life Insurance Company
  
3
   
60
   
1
   
5
   
5
   
18
                 
1
     
Fund shares Purchased
                                       
11
          
7
Other Liabilities
  
6
   
81
   
2
   
21
   
10
   
1
          
5
     
2
   
13
   
Total Liabilities
  
9
   
141
   
3
   
26
   
15
   
19
          
16
     
3
   
20
   
NET ASSETS
  
$2,182
   
$28,215
   
$1,104
   
$7,019
   
$5,256
   
$9,439
     
$115
   
$2,322
     
$532
   
$4,814
   
Shares Owned in each Portfolio
  
217
   
1,473
   
103
   
336
   
355
   
856
     
16
   
79
     
44
   
260
   
Cost of Investments
  
$2,175
   
$19,815
   
$1,054
   
$4,730
   
$4,239
   
$9,068
     
$140
   
$2,017
     
$620
   
$5,797
   
 
(1) Formerly
 
named Government Securities Portfolio.
 
See Notes to Financial Statements

1

 
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
FOR THE YEAR ENDED DECEMBER 31, 2001
(In thousands)
 
    
Variable Account I
       
Variable Account
II
       
Variable
Account IV
       
Variable
Account VII
       
Variable
Account IX
       
Variable
Account
X
     
Variable
Account XI
       
Variable
Account XII
       
Variable
Account XIII
       
Variable Account XIV
  
    
INVESTMENT INCOME
                                                                                      
Dividends
   
$101
 
     
$2,076
 
     
$47
 
     
$150
 
     
$148
 
     
$488
     
$15
 
     
$39
 
     
$16
 
     
$1,034
 
EXPENSES
                                                                                      
Mortality and expense risk fees and operating expenses
   
32
 
     
396
 
     
15
 
     
97
 
     
67
 
     
115
     
2
 
     
33
 
     
7
 
     
73
 
    
Net Investment Income
   
69
 
     
1,680
 
     
32
 
     
53
 
     
81
 
     
373
     
13
 
     
6
 
     
9
 
     
961
 
    
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
                                                                                      
Net realized gain (loss)
from security transactions
   
3
 
     
1,036
 
     
(1
)
     
409
 
     
112
 
     
22
     
(15
)
     
(46
)
     
(35
)
     
(1,525
)
Net unrealized appreciation (depreciation)
on investments
   
(2
)
     
(11,994
)
     
6
 
     
(1,384
)
     
(329
)
     
163
              
(395
)
     
(147
)
     
(1,945
)
    
Net Realized and Unrealized Gain (Loss)
on Investments
   
1
 
     
(10,958
)
     
5
 
     
(975
)
     
(217
)
     
185
     
(15
)
     
(441
)
     
(182
)
     
(3,470
)
    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
   
$70
 
     
($9,278
)
     
$37
 
     
($922
)
     
($136
)
     
$558
     
($2
)
     
($435
)
     
($173
)
     
($2,509
)
    
 
See Notes to Financial Statements
 

2

 
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
FOR THE YEAR ENDED DECEMBER 31, 2001
(In thousands)
 
   
Variable
Account I
       
Variable
Account II
       
Variable
Account IV
       
Variable
Account VII
       
Variable
Account IX
       
Variable
Account X
       
Variable
Account XI
       
Variable
Account XII
       
Variable
Account XIII
       
Variable
Account XIV
  
   
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
                                                                                       
Net investment income
  
$69
 
     
$1,680
 
     
$32
 
     
$53
 
     
$81
 
     
$373
 
     
$13
 
     
$6
 
     
$9
 
     
$961
 
Net realized gain (loss)
from security transactions
  
3
 
     
1,036
 
     
(1
)
     
409
 
     
112
 
     
22
 
     
(15
)
     
(46
)
     
(35
)
     
(1,525
)
Net unrealized appreciation (depreciation)
on investments
  
(2
)
     
(11,994
)
     
6
 
     
(1,384
)
     
(329
)
     
163
 
              
(395
)
     
(147
)
     
(1,945
)
   
Net Increase (Decrease) in Net Assets
Resulting from Operations
  
70
 
     
(9,278
)
     
37
 
     
(922
)
     
(136
)
     
558
 
     
(2
)
     
(435
)
     
(173
)
     
(2,509
)
   
INCREASE (DECREASE) IN NET ASSETS
FROM ACCOUNT TRANSACTIONS
                                                                                       
Transfer of net premiums
           
18
 
     
9
 
     
15
 
     
3
 
     
2
 
              
22
 
     
1
 
     
86
 
Transfers between variable accounts, net
  
496
 
     
(1,221
)
     
183
 
     
5
 
     
40
 
     
357
 
     
30
 
     
(122
)
     
5
 
     
(892
)
Transfers—policy charges and deductions
  
(191
)
     
(457
)
     
(1
)
     
(17
)
     
(29
)
     
(26
)
              
(4
)
     
(1
)
     
(33
)
Transfers—surrenders
  
(833
)
     
(2,990
)
     
(340
)
     
(1,286
)
     
(672
)
     
(1,079
)
     
(45
)
     
(338
)
     
(61
)
     
(462
)
Transfers—other
           
26
 
              
4
 
     
1
 
              
(2
)
     
4
 
              
7
 
   
Net Decrease in Net Assets
Derived from Account Transactions
  
(528
)
     
(4,624
)
     
(149
)
     
(1,279
)
     
(657
)
     
(746
)
     
(17
)
     
(438
)
     
(56
)
     
(1,294
)
   
NET DECREASE IN NET ASSETS
  
(458
)
     
(13,902
)
     
(112
)
     
(2,201
)
     
(793
)
     
(188
)
     
(19
)
     
(873
)
     
(229
)
     
(3,803
)
   
NET ASSETS
                                                                                       
Beginning of Year
  
2,640
 
     
42,117
 
     
1,216
 
     
9,220
 
     
6,049
 
     
9,627
 
     
134
 
     
3,195
 
     
761
 
     
8,617
 
   
End of Year
  
$2,182
 
     
$28,215
 
     
$1,104
 
     
$7,019
 
     
$5,256
 
     
$9,439
 
     
$115
 
     
$2,322
 
     
$532
 
     
$4,814
 
   
 
See Notes to Financial Statements
 

3

 
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2000
(In thousands)
 
   
Variable
Account I
       
Variable
Account II
       
Variable
Account IV
       
Variable
Account
VII
       
Variable
Account IX
       
Variable
Account X
       
Variable
Account XI
       
Variable
Account XII
       
Variable
Account XIII
       
Variable
Account XIV
  
   
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
                                                                                       
Net investment income
  
$135
 
     
$3,266
 
     
$46
 
     
$883
 
     
$590
 
     
$181
 
     
$13
 
     
$30
 
     
$20
 
     
$1,568
 
Net realized gain (loss)
from security transactions
  
5
 
     
3,677
 
     
(4
)
     
699
 
     
260
 
     
(7
)
     
(8
)
     
(24
)
     
(24
)
     
(310
)
Net unrealized appreciation (depreciation) on investments
  
1
 
     
(22,255
)
     
58
 
     
(2,424
)
     
(887
)
     
228
 
     
(13
)
     
(400
)
     
(115
)
     
(3,896
)
   
Net Increase (Decrease) in Net Assets Resulting from Operations
  
141
 
     
(15,312
)
     
100
 
     
(842
)
     
(37
)
     
402
 
     
(8
)
     
(394
)
     
(119
)
     
(2,638
)
   
INCREASE (DECREASE) IN NET ASSETS FROM ACCOUNT TRANSACTIONS
                                                                                       
Transfer of net premiums
           
41
 
                       
5
 
     
2
 
                       
2
 
     
11
 
Transfers between variable accounts, net
  
(486
)
     
(167
)
     
176
 
     
(535
)
     
(214
)
     
9,469
 
     
(36
)
     
375
 
     
307
 
     
2,872
 
Transfers—policy charges and deductions
  
(25
)
     
(591
)
              
(65
)
     
(19
)
                       
(11
)
              
(104
)
Transfers—surrenders
  
(347
)
     
(8,392
)
     
(242
)
     
(1,743
)
     
(1,203
)
     
(593
)
     
(15
)
     
(392
)
     
(215
)
     
(903
)
Transfers—other
  
(1
)
     
394
 
     
(1
)
     
105
 
     
2
 
     
51
 
     
1
 
     
2
 
     
18
 
     
5
 
   
Net Increase (Decrease) in Net Assets Derived from Account Transactions
  
(859
)
     
(8,715
)
     
(67
)
     
(2,238
)
     
(1,429
)
     
8,929
 
     
(50
)
     
(26
)
     
112
 
     
1,881
 
   
NET INCREASE (DECREASE) IN NET ASSETS
  
(718
)
     
(24,027
)
     
33
 
     
(3,080
)
     
(1,466
)
     
9,331
 
     
(58
)
     
(420
)
     
(7
)
     
(757
)
   
NET ASSETS
                                                                                       
Beginning of Year
  
3,358
 
     
66,144
 
     
1,183
 
     
12,300
 
     
7,515
 
     
296
 
     
192
 
     
3,615
 
     
768
 
     
9,374
 
   
End of Year
  
$2,640
 
     
$42,117
 
     
$1,216
 
     
$9,220
 
     
$6,049
 
     
$9,627
 
     
$134
 
     
$3,195
 
     
$761
 
     
$8,617
 
   
 
See Notes to Financial Statements

4

PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
 

 
1. ORGANIZATION
 
Pacific Corinthian Variable Separate Account (the “Separate Account”) of Pacific Life Insurance Company (“Pacific Life”) is a separate investment account originally established by a resolution of the Board of Directors of Pacific Corinthian Life Insurance Company (“PCL”).
 
PCL, formerly a wholly-owned subsidiary of Pacific Life, was a stock life insurance company organized under the laws of the State of California.
 
PCL was formed to rehabilitate the business of First Capital Life Insurance Company (“FCL”) under a five-year rehabilitation plan (“the Plan”). Under the terms of the Plan, FCL’s insurance policies in force, primarily individual annuities and universal life insurance, were restructured and assumed by PCL on December 31, 1992, pursuant to an assumption reinsurance agreement and asset purchase agreement. On September 30, 1997, PCL completed the Plan of FCL. On October 30, 1997, PCL was merged into Pacific Life, with Pacific Life as the surviving entity. The Separate Account remained intact and became a Separate Account of Pacific Life.
 
The Separate Account held by Pacific Life represents funds from individual flexible premium deferred annuity and variable accumulation contracts. The assets of the Separate Account are carried at market value.
 
The Separate Account which operates as a unit investment trust under the Investment Company Act of 1940, as amended, is divided into subaccounts (“Variable Accounts”). The assets in each Variable Account are invested in shares of the corresponding portfolios of Pacific Select Fund (the “Fund”) as follows:
 
   
Portfolios
Variable Account I
  
Money Market Portfolio
Variable Account II
  
Equity Portfolio
Variable Account IV
  
Inflation Managed Portfolio *
Variable Account VII
  
Equity Income Portfolio
Variable Account IX
  
Multi-Strategy Portfolio
Variable Account X
  
Managed Bond Portfolio
Variable Account XI
  
High Yield Bond Portfolio
Variable Account XII
  
Equity Index Portfolio
Variable Account XIII
  
International Value Portfolio
Variable Account XIV
  
Growth LT Portfolio
 
 
* Formerly named Government Securities Portfolio.
 
 
Each portfolio pursues different investment objectives and policies. The financial statements of the Fund, including the schedules of investments, are provided separately and should be read in conjunction with the Separate Account’s financial statements.
 
On September 22, 2000, the net assets of the Fund’s Bond and Income Portfolio, the underlying portfolio for the Bond and Income Variable Account, were transferred to the Fund’s Managed Bond Portfolio in exchange for the shares of the Managed Bond Portfolio (the “reorganization”). In connection with the reorganization, a total of 2,015,150 outstanding accumulation units (valued at $9,464,300) of the Bond and Income Variable Account were exchanged for 6,543,824 accumulation units with equal value of the Managed Bond Variable Account.
 
2. SIGNIFICANT ACCOUNTING POLICIES
 
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America for investment companies which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates.
 
A. Valuation of Investments
 
Investments in shares of the Fund are valued at the reported net asset values of the respective portfolios. Valuation of securities held by the Fund is discussed in the notes to its financial statements.
 
B. Security Transactions and Investment Income
 
Transactions are recorded on the trade date. Realized gains and losses on sales of investments are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date.
 
C. Federal Income Taxes
 
The operations of the Separate Account will be reported on the Federal income tax return of Pacific Life, which is taxed as a life insurance company under the provisions of the Tax Reform Act of 1986. Under current tax law, no Federal income taxes are expected to be paid by Pacific Life with respect to the operations of the Separate Account.
 
3. DIVIDENDS
 
During 2001, the Fund declared dividends for each of the portfolios invested in by the Separate Account. The amounts accrued by the Separate Account for its share of the dividends were reinvested in additional full and fractional shares of the related portfolio.
 
4. RELATED PARTY AGREEMENT
 
Pacific Select Distributors, Inc., a wholly-owned subsidiary of Pacific Life, serves as principal underwriter of variable annuity contracts funded by interests in the Separate Account, without remuneration from the Separate Account.

5

PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Continued)
 
5.  SEPARATE ACCOUNT’S COST OF INVESTMENTS IN THE FUND SHARES
 
The investment in the Fund shares are carried at identified cost, which represents the amount available for investment (including reinvested distributions of net investment income and realized gains) in such shares after deduction of mortality and expense risk and administrative charges (M&E). A reconciliation of total cost and market value of the Separate Account’s investments in the Fund as of December 31, 2001 were as follows (amounts in thousands):
 
    
Variable Accounts
  
    
    
I
     
II
       
IV
     
VII
       
IX
  
    
Total cost of investments at beginning of year
   
$2,631
     
$21,746
 
     
$1,172
     
$5,548
 
     
$4,704
 
Add:  Total net proceeds from policy and M&E transactions
   
751
     
153
 
     
275
     
250
 
     
210
 
Reinvested distributions from the Fund:
                                       
(a) Net investment income
   
101
     
14
 
     
47
     
53
 
     
138
 
(b) Net realized gain
          
2,062
 
            
97
 
     
10
 
    
                Sub-Total
   
3,483
     
23,975
 
     
1,494
     
5,948
 
     
5,062
 
Less:  Cost of investments disposed during the year
   
1,308
     
4,160
 
     
440
     
1,218
 
     
823
 
    
Total cost of investments at end of year
   
2,175
     
19,815
 
     
1,054
     
4,730
 
     
4,239
 
Add:  Unrealized appreciation
   
13
     
8,481
 
     
52
     
2,310
 
     
1,027
 
    
Total market value of investments at end of year
   
$2,188
     
$28,296
 
     
$1,106
     
$7,040
 
     
$5,266
 
    
    
X
     
XI
       
XII
     
XIII
       
XIV
  
    
Total cost of investments at beginning of year
   
$9,419
     
$159
 
     
$2,496
     
$702
 
     
$7,661
 
Add:  Total net proceeds from policy and M&E transactions
   
392
     
29
 
     
211
     
43
 
     
474
 
Reinvested distributions from the Fund:
                                       
(a) Net investment income
   
488
     
15
 
     
28
     
6
 
     
65
 
(b) Net realized gain
                   
11
     
10
 
     
969
 
    
                Sub-Total
   
10,299
     
203
 
     
2,746
     
761
 
     
9,169
 
Less:  Cost of investments disposed during the year
   
1,231
     
63
 
     
729
     
141
 
     
3,372
 
    
Total cost of investments at end of year
   
9,068
     
140
 
     
2,017
     
620
 
     
5,797
 
Add:  Unrealized appreciation (depreciation)
   
372
     
(25
)
     
310
     
(86
)
     
(970
)
    
Total market value of investments at end of year
   
$9,440
     
$115
 
     
$2,327
     
$534
 
     
$4,827
 
    
 
6. FINANCIAL HIGHLIGHTS
 
Selected accumulation unit value (AUV), total units outstanding, total net assets, ratios of investment income and expenses to average daily net assets, and total returns for the year ended December 31, 2001 were as follows:
 
Variable Accounts
   
AUV
at
End
of Year
   
Number
of
Units Outstanding
   
Total
Net
Assets
(in $000’s)
   
Ratios of Investment Income to Average
Net Assets
   
Ratios
of
Expenses to Average
Net Assets
   
Total
Returns (1)
I
   
$2.20
   
992,530
   
$2,182
   
3.87%
   
1.21%
   
2.62%
II
   
6.16
   
4,578,403
   
28,215
   
6.33%
   
1.21%
   
(22.70%)
IV
   
2.36
   
467,059
   
1,104
   
3.71%
   
1.20%
   
3.02%
VII
   
3.00
   
2,336,761
   
7,019
   
1.88%
   
1.21%
   
(9.97%)
IX
   
2.65
   
1,985,813
   
5,256
   
2.67%
   
1.21%
   
(2.34%)
X
   
1.60
   
5,914,861
   
9,439
   
5.11%
   
1.21%
   
6.04%
XI
   
1.34
   
85,823
   
115
   
9.90%
   
1.21%
   
0.13%
XII
   
2.49
   
931,726
   
2,322
   
1.45%
   
1.21%
   
(13.21%)
XIII
   
1.23
   
433,781
   
532
   
2.68%
   
1.21%
   
(22.81%)
XIV
   
2.75
   
1,752,136
   
4,814
   
17.14%
   
1.21%
   
(30.40%)
 
(1)
 
Total returns reflect a deduction for mortality and expense risk (M&E) charges and operating expenses assessed through the daily accumulation unit value calculation. M&E charges are assessed at an annual rate of 1.19% of the average daily net assets of each Variable Account as discussed in Note 7. Total returns do not include deductions at the separate account or contract level for any premium loads, maintenance fees, premium tax charges, surrender charges, or other charges that may be incurred under a contract which, if incurred, would have resulted in lower returns.

6

PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Continued)
 

7. CONTRACT CHARGES
 
A contingent deferred sales charge may be deducted upon partial or complete withdrawal or upon annuitization of a Contract.
 
An annual contract maintenance charge of $30 is imposed on all Contracts on December 31 of each year. The charge covers the cost of Contract administration and is apportioned equally among the Accounts to which the Contract Value is allocated.
 
Mortality and expense risks assumed by Pacific Life are compensated for by a charge equivalent to an annual rate of 1.19% of the value of each Variable Account’s net assets of which approximately 1.00% is for assuming mortality risks and 0.19% is for assuming expense risks.
 
In addition, the Separate Account bears certain of its operating expenses, subject to Pacific Life’s guarantee that such expenses will not exceed 0.25% of each Variable Account’s average daily net assets annually. Pacific Life further guarantees that the ordinary operating expenses of a Variable Account together with the operating expenses incurred by its underlying Fund Portfolio, exclusive of advisory and management fees, interest, taxes, brokerage commissions, transaction costs or extraordinary expenses, will not exceed 0.60% of average daily net assets annually after consideration for any adjustment by the Fund’s Investment Adviser for Fund expenses in excess of stated expense limitations, except that additional custodial costs associated with holding foreign securities and foreign taxes on dividends, interests and gains will also be excluded with respect to the underlying International Value Portfolio of the Fund. For the year ended December 31, 2001, these operating expenses for each of the Variable Accounts were below the 0.25% expense cap.

    7

 
The Board of Directors
Pacific Life Insurance Company
 
We have audited the accompanying statement of assets and liabilities of Pacific Corinthian Variable Separate Account (the “Separate Account”) (comprised of Variable Accounts I, II, IV, VII, IX, X, XI, XII, XIII, and XIV) as of December 31, 2001 and the related statement of operations and financial highlights for the year then ended and the statement of changes in net assets for each of the two years then ended. These financial statements and financial highlights are the responsibility of the Separate Account’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
 
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2001. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement and financial highlights presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective Variable Accounts constituting Pacific Corinthian Variable Separate Account as of December 31, 2001 and the results of their operations, financial highlights, for the year then ended and the changes in their net assets for each of the two years then ended, in conformity with accounting principles generally accepted in the United States of America.
 
DELOITTE & TOUCHE LLP
 
Costa Mesa, California
February 8, 2002

8

Annual Report
as of December 31, 2001
 
• 
 
Pacific Corinthian Variable 
    Separate
 
Account of
    Pacific
 
Life Insurance Company
 
Accountants
Deloitte & Touche LLP
695 Town Center Drive
Suite 1200
Costa Mesa, CA 92626
 
Counsel
Dechert
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
 
 
 
 
Pacific Life Insurance Company
 
Annuities & Mutual Funds Division
 
P.O. Box 7187
 
Pasadena, California 91109-7187
 
 
ADDRESS SERVICE REQUESTED
 
 
Form No. 1001-2A